Aluminium billet premiums remain under pressure globally

Aluminium billet premiums trended downward globally on Friday, August 26, with participants in all the major markets reporting a decrease

US billet down on waning construction, P1020 decline

The aluminium extrusion billet premium in the United States declined on weaker demand and continued pressure on the underlying premium for primary aluminium.

Fastmarkets assessed the aluminium 6063 extrusion billet premium, delivered Midwest US, at 25-28 cents per lb on Friday, narrowing downward by 2 cents from 25-30 cents per lb on August 12.

The underlying P1020 premium, to which the billet premium is added, declined over the assessment period, although it was stable on Friday. Billet is made from P1020.

Fastmarkets assessed the aluminium P1020A premium, ddp Midwest US, at 25.5-26.5 cents per lb on Friday, unchanged from Tuesday after it declined in the previous three twice-weekly assessments.

The P1020 premium was one cent per lb higher - 25.5-26.5 cents per lb - at the time of the last billet assessment on August 12. And it is on a downtrend from an all-time high of 40 cents per lb at the midpoint on May 3 this year.

Fastmarkets heard of billet makers’ buying P1020 at very competitive premiums in late August. Their purchases below the prevailing range are said to reflect billet makers’ own margins being squeezed.

Just one US billet spot sale was reported to Fastmarkets over the past two weeks, at 27 cents per lb, but most sources said they had not even heard of spot activity.

“Billet’s down because construction is down,” a trader of the value-added aluminium product said.

US construction had remained very strong until recently, but now residential building is down. Single-family construction fell to a two-year low in June, US government data shows.

Automaking - another end market for aluminum billet - had already been hampered by a parts shortage before concerns over recession this summer weakened it further.

European market continues downward trend

European aluminium billet premiums continued to trend downward despite the ongoing seasonal lull, with supply remaining ample, and consumers nowhere to be seen.

Fastmarkets assessed the aluminium 6063 extrusion billet premium, ddp North Germany (Ruhr region), at $1,100- 1,150 per tonne on Friday, down from $1,250-1,300 per tonne on July 29.

In Europe, rising energy costs were a concern to billet producers whose margins were being pressured by falling premium levels and higher input costs.

“Everything is very negative on the billet market; everyone worried is about energy [but] the main issue here is demand, it’s very weak at the moment,” a producer source said.

“Our margins are very limited with these kinds of energy prices,” the producer source added.

As the summer season comes to end, many participants were now expecting trade to resume and to complete fourth-quarter negotiations, which many had postponed.

Supply has remained ample in Europe amid falling demand, with some now seeking to shift tonnes from their books.

The Southern Europe market was still closed until next week, according to one market source.

“The market will be more active next week; most will be back and will try to exchange views,” a second producer source said.

Elsewhere in Europe, premiums in other locations also decreased.

Fastmarkets assessed the aluminium 6063 extrusion billet premium, ddp Italy (Brescia region), at $1,100- 1,150 per tonne on Friday, down from $1,250-1,300 per tonne on July 29.

While Fastmarkets assessed the aluminium 6063 extrusion billet premium, ddp Spain, at $1,075– 1,150 per tonne on Friday, down from $1,200-1,260 per tonne on July 29.

The downtrend continued in Turkey also.

Fastmarkets assessed the aluminium 6063 extrusion billet premium, cif Turkey (Marmara region), at $650-700 per tonne on Friday, down from $700-800 per tonne one month earlier.

Thailand

Fastmarkets’ monthly assessment of the aluminium 6063 extrusion billet premium, cif Thailand, held steady at $420-490 per tonne on Friday.

The spot market remained illiquid due to weak downstream demand, while buyers have adopted a wait-and-see attitude for restocking.

One Thailand-based trader source said some customers had requested for cargo deferments or even cancelled deals, and local demand is not expected to improve before October.

However, a weakening Thai baht and higher energy prices have led to increased costs for local producers. The result is some producers have cut production of billets and are only producing aluminium ingots, according to market participants.

A Japan-based producer source saw the market as being more resilient because of a big price difference between Asia and Europe.

Brazilian premium holds amid market lull

Aluminium billet spot trade has come to a halt in Brazil, keeping the import premium unchanged at end-of-July levels on Friday.

Fastmarkets assessed the aluminium 6063 & 6060 extrusion billet premium, cif Brazilian main ports, at $700-750 per tonne on Friday, stable since July 29, when it fell by $50 per tonne from $750-800 per tonne on July 15.

According to market participants, offers to Brazil have become rarer due to persistently weak spot demand, while interest from clients also dwindled in anticipation for domestic talks about 2023 annual contracts, expected to be held in September.

“The market is at a halt, probably for a month,” a trader source in the country said. “We should see more activity emerging in the fourth quarter.”

Following the more bearish scenario globally, the Brazilian import premium has been in a downtrend since April. But in spite of that decrease – a drop of $70-100 per tonne from $800-820 per tonne on April 8 – spot demand for foreign material failed to improve through most of 2022.

A second trader source in Brazil said that for imports to be more competitive, premiums should be even lower.

“Some [import] offers are standing at $700 per tonne, and that’s a similar premium to domestic billet on a ddp basis,” the second trader told Fastmarkets.

Considering a 4.8% import duty to import aluminium billet and overall port and transportation costs, the ddp premium for imports would be close to or even above $1,000 per tonne.

“I don’t believe we’ll see much happening in the coming months,” a third trader source said. “We’ll just have to wait and see how rising interest rates will affect the construction market going forward.”

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